By John Vomhof Jr. – Staff reporter/broadcaster, Minneapolis / St. Paul Business Journal

Sep 28, 2012, 5:00am CDTUpdatedSep 28, 2012, 10:44am CDT

Visible Customer became a big player in automotive marketing in the mid- to late-2000s, working with more than 250 dealers across the country. But it collapsed in 2010 after its sale to Curtis Carlson Nelson, who, the company’s founder said, outspent the firm’s revenue.

Now Visible Customer, which sells marketing programs to car dealers that help better target individual customers, will get another chance under a new owner: the Minnesota Automobile Dealers Association (MADA).

Founder John Stapleton said the deal, which closed Aug. 3, makes a natural fit for Visible Customer by tying it closer to its core market. And it’s already growing: The company increased staff from five to 15 since the acquisition and wants to double its nationwide footprint of 30 dealers within six months.

“We’ve laid out a plan for growth, and it’s already well into the swing of it,” said Stapleton, who stayed on as president following the deal.

The dealers association, meanwhile, was drawn to the Visible Customer because it “doesn’t service customers but rather the dealers themselves, which is what we’re all about,” said MADA Executive Director Scott Lambert, who took over as Visible Customer’s CEO. Plus, it will provide the association with a new revenue stream.

“We’ve had such contraction in the industry that we need to find new sources of revenue,” he said, noting that MADA has approximately 365 members today, less than half as many as when he joined the organization as a lobbyist in 1989.

The company’s core service aims to keep dealers in touch with existing customers, who may not be in the market for another car anytime soon, through personalized product and service offerings.

“[Visible Customer] has kind of had a hopscotched history, but the basic philosophy hasn’t changed,” Stapleton said. “We want to enhance the relationship between dealers and their customers throughout the ownership if a vehicle and hopefully into the purchase of the next one.”

Rise and fall

Stapleton, a serial entrepreneur, founded Visible Customer in 2005, recognizing the need for auto dealers to focus on the entire life-cycle of a customer, instead of just the initial transaction. By 2008, the business had reached a level of profitability that attracted a majority investment from Nelson, one-time heir to the Carlson hospitality and marketing empire.

Nelson had big plans for expansion, stating in a March 2009 Twin Cities Business article that he planned to grow the company to revenue of $57 million that year, up from $8 million in 2008. However, the company’s expenses climbed even faster, and in July 2010, the company filed for Chapter 7 bankruptcy with $172,293 in assets and $11.9 million in liabilities. (Nelson also filed for Chapter 11 personal bankruptcy in May 2011.)

At the time of the bankruptcy, a spokesman for Nelson blamed Visible Customer’s demise on the economy. However, Stapleton says the “economy was never an enemy at all,” because the company’s marketing software became more relevant for dealers as customers started to keep their cars longer instead of buying new ones.

Rather, Stapleton contends that Visible Customer’s primary problem was Nelson’s spending habits. That aligns with allegations made in a 2011 employment lawsuit, in which former Visible Customer president Siamak Masoudi said Nelson chartered a private jet with company funds for a Las Vegas vacation with his girlfriend and spent thousands of dollars to redecorate offices and create a meditation room.

Nelson could not be reached for comment, but had previously denied Masoudi’s allegations. The parties eventually settled the lawsuit.

Masoudi also said in the lawsuit that the company’s software didn’t work as advertised. Stapleton denied that the software was ever an issue, but acknowledged customer service did decline as the company cut workers.

Ready for a comeback

Stapleton and his daughter, Visible Customer Chief Sales Officer Kate Donovan, bought the company’s proprietary software and other assets out of bankruptcy and attracted Minnetonka-based Concord Capital Partners as an investor. However, Concord officials ultimately decided they did not want to be in the automotive business, leading Stapleton to pursue other investors — a search that ultimately led to the deal with MADA.

MADA’s acquisition was backed by private equity from some of the organization’s individual members, including Golden Valley-based Motors Management Corp., parent company of Luther Automotive Group.

“MADA is very important to us,” Motors Management President David Luther said. “We’re always looking for opportunities to help strengthen and bolster our association, and we felt this was a good opportunity and tool to do that.”

Walser Automotive Group CEO Paul Walser, who serves as president of the MADA board, said he thinks the acquisition is a strong investment for the association.

“MADA was able to acquire this system and access to some key employees who really understand it at a very good price compared to what it would take to reproduce it,” said Walser, who did not personally invest in the deal. “This is a valuable service to auto dealers. Everyone’s trying to figure out how to cut through the clutter and spend their dollars more wisely.”